Have you been looking for all the information you need to make the best forex broker choice for you?
Now you have exactly that!
Here we have put together our how to choose a forex broker checklist to help you check every box in choosing a broker.
This listing will go into detail on everything you need to know. If you feel like taking a shortcut though feel free to check our article here on best forex brokers in the world. This has some of the best brokers listed taking into account many key features like security, costs, trading features, and much more along with also showing you how to get started.
For the complete checklist though, stay right here and continue reading!
Table of contents
How to choose a Forex Broker: A complete Checklist
Here are all of the most important factors to consider when you are choosing your forex broker:
1. Do not trust cold calling brokers
If you get a call out of the blue from a broker who you didn’t give your number to, it is highly likely to be a scam. Do not trust this kind of broker since almost all respected regulatory bodies have banned this cold calling practice.
2. Check if the broker is regulated in your country
Regulation is key when choosing your broker. You want to make sure they are respected and secure. This means double-checking their registration with the related regulatory body and making sure they are allowed to operate in your country. It also means checking your own local regulations to make sure they are permitted.
3. Investigate the broker’s authority
Checking out the background of the broker is an important step in making your choice. This means doing some due diligence of your own and finding out about their history in the industry. Things like, how long have they been operating, are they award-winning, who are the team behind them, and do they have a good reputation among traders, are all important.
4. Inspect the broker’s transparency and its customer service
Transparency means not holding anything back. Check to ensure all of the fees, terms, and conditions, and what is on offer from the broker is easily available, and clear to understand. You may also need support so it is important to think about the contact methods, response time, and professionalism of their customer service.
5. Choose a broker that stores and segregates your funds in a good bank
Nowadays, almost all brokers use segregated accounts at top-tier banks as mandated by the regulator. This is something to confirm though, as is the reputation of any banks they use for these kinds of services.
6. Check if the broker offers the Negative Balance Protection
Negative balance protection is important at all levels but particularly if you are a new trader. It stops you from ever losing more than you deposit. It is automatic under ESMA in the EU, or the FCA in the UK but outside these areas is not mandatory. It is something to check up on.
7. Check if the broker offers an Insurance
Many brokers will offer insurance particularly if they are regulated by a top-tier regulator. This is most likely up to $100,000 in coverage but can be up to $1,000,000 and worth verifying. It is great to have if some serious issues like a dispute or insolvency arise.
8. Examine the broker’s Execution Type
There are many broker types so it is important you choose one that can execute your trades in the best way you need. If it is market liquidity you need then an ECN broker may be best. For stock investing try an STP broker. There are also many hybrid ECN/STP broker choices.
9. Inspect if the broker has Banned trading techniques
You will want to make sure the trading techniques you plan to use are permitted by the broker. This may be scalping or hedging in many cases, or even more obscure strategies like sniping. You want to make sure you don’t break any terms that could lead to account closure or even a broker refund request.
10. Scan the broker’s spreads and commissions
It goes without saying that you will typically want the lowest spreads and commissions you can get. Anything lower than 1 pip is generally considered good. If you are planning on day trading though you may prefer a raw spread from 0 pips that some brokers can offer.
11. Look for your favorite Account type
Brokers will often offer many account types. You can and should browse these before opening to make sure they have an ideal account type for you. This could be one with raw spreads from 0 pips, a low-risk cent or nano account, or even accounts that let you trade real stocks and ETFs.
12. Explore the broker’s available Markets
You will find a core of the basic markets available from every broker. Things like major FX pairs, indices, gold, and oil. Having more choice though is always a good thing. Just make sure that this does not come at the expense of higher fees and charges either trading or non-trading.
13. Check the broker’s Trading hours and VPS offering
You may want to trade in the pre-market or after hours for stocks or forex. If you want to do this you will need to make sure that the broker offers such trading times or even use of a VPS for 24/7 trading.
14. Examine the broker’s minimum deposit
You will know or should know how much you can afford to deposit. Make sure you choose a broker who has a minimum deposit that fits inside your budget. Typically this can be around $200 though there are brokers with higher minimum deposits and others with no minimum deposit at all.
15. Check the broker’s Leverage
If you plan to get into margin trading, first know the risks, but second double-check that the broker allows leverage. In the EU and UK this is typically restricted to a 30:1 maximum. It may be higher if you choose another offshore regulated broker but you need to make sure this is possible and permitted first.
16. Explore the broker’s Trading Platform and Research tools
Once you get into trading, the trading platform becomes your lifeblood, and charting and research tools are vital to gaining insight. You will want to ensure the broker provides sufficient depth here. Check out the platforms that are available too with the likes of MT4, and cTrader (perfect for scalping), being the big names.
17. Explore the broker’s Educational content
Learning and continuing to grow at all levels is important. This means checking out the educational section. Is it free? Is it detailed enough? If you are an advanced user, is there enough challenging material like webinars, expert advice, and more?
18. Check if the broker offers Social-copy trading
If you want some interactivity when trading, maybe you would be interested in social trading or social features to allow you to engage with other traders. This is something to look out for as a new trader, and possibly even a way to earn money for those with more experience offering trading signals and strategies to be copied.
19. Investigate the broker’s demo account
The demo account is your perfect place to learn more about a broker. Do they allow for unlimited use or is it restricted to a certain number of days? And can you continue using it after you open a live account? You will also want to ensure it is an authorized demo account run by the broker themselves.
20. Scan the broker’s Forex Bonus & contests
Such bonuses and contests are not available to EU or UK traders due to regulation but if this is something that interests you then it is worth checking. It can be a great way to get started though be mindful there are usually a lot of conditions attached. These can make the bonuses hard to withdraw in many cases.
Where there is no bonus though there may be other benefits like an active trader program, rebates on trades, or other incentives to lower costs.
21. Examine the broker’s min-max trading size
You will want to make sure both the minimum and maximum trade size fits your needs. This usually runs between 0.01 lots and 100 lots. Nano lots offered in Cent and Micro accounts are also ideal for beginner traders.
22. Investigate the broker’s Deposit and withdrawal
It is likely you will want to deposit and withdraw from time to time. This means you need to check out any conditions, fees, the methods they allow, and how much time it may take to process on both ends.
Any specific need? Here’s what you have to look for in a Forex Broker
Beyond this detailed checklist, you may have some of your own specific needs depending on your experience or trading style. Here are a few more specific points to think about:
Are you a beginner? Cent and Demo accounts are for you
As a beginner, the first top place for you to start is a good demo account. These are completely free and trade with virtual funds. This means you can get to know a broker with no risk.
You may then like to move on to a cent account since these usually have a very low minimum deposit that is normally under $10 and are low-risk.
A strong educational section and good customer support are two other important elements of any broker choice that can help you get along well with what might be your first forex broker.
To make things even easier, we have already prepared this article on the best forex brokers for beginners that can guide you with helpful tips and advice starting out.
Copy Traders and Signal Providers may require a specific platform
Copy trading and signal providing you may look for slightly different things in a broker.
As a signal provider, you will want a broker that provides a good commission based on your followers (copiers), as well as a good range of assets for you to trade, and good infrastructure to organize and manage your accounts and followers.
As a copy trader, you may prioritize things like a low commission, a low minimum investment requirement when copying a position, and brokers who have strict standards in terms of the signal providers they accept. This typically rules out lucky traders and focuses on the real experts.
It can be tough finding a great copy trading broker. For that reason, we have searched the market and put together some of the very best that you can find here with our article on the best copy trade service.
Scalpers: Fast execution and low spreads are a must
As a scalper, there are a few features absolutely vital to give you the best chances at success. These include the fastest execution and the lowest spreads as a matter of priority.
Beyond this, you may want to think about platforms that allow one-click trading to make things even faster since speed is of the essence. You will also want deep liquidity so you never have a problem matching trades. A broker that allows algo-trading may also be beneficial to your needs, as well as the availability of the cTrader platform that most scalpers prefer.
Again we have taken the work out of your search by combining brokers with all of these features in our top ten article on the best low spread forex brokers for scalping.
Algo Traders may be interested in MT4 brokers
If you are interested in algo-trading, you will also have a few different requirements from your broker.
In this case, you will want to seek out a broker providing a top-quality and stable VPS for 24/7 trading as well as the MetaTrader 4 trading platform for access to EAs and the huge community around this. MT5 and cTrader platforms can also be good options for algo-trading. Finally, you will want a broker that is highly efficient and with no requotes if possible so that your EAs can run smoothly.
If you check out this listing on the best forex broker for algo trading, then you can find many brokers who fit the bill here with all of these features.
About the Author
Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world.
A trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.
He is a keen golfer with a very high handicap so when not helping you find the best broker for your needs, you may find him on the course or just as likely following any number of sports from the comfort of his sofa.